Iran sees oil freeze plan meaningless, expert says

Since majority of OPEC nations along with non-OPEC Russia have decided to attend the Doha meeting scheduled for April 17 to discuss oil production freeze plans, all eyes were on Iran, which recently refused from participating in the meeting.

Experts believe that such a decision of Tehran is understandable as the Islamic Republic suffered a severe decline in oil exports following the international sanctions imposed on it due to its nuclear program.

Anne Korin believes that Iran realizes that the oil freeze plan is basically meaningless and falls short of what it desires.

“As far as Iran is concerned, despite the hand-waving from the Saudis about a freeze, this is a continuation of proxy war in the economic arena,” the co-director of the Institute for the Analysis of Global Security told Trend on March 28.

She said that if the Saudis really wanted to drive prices up, they would have pushed through a significant production cut.

“They very well know a freeze won’t have impact until growing demand soaks up excess supply, which will take quite a while,” she added.

In February 2016, energy ministers of three OPEC members – Saudi Arabia, Venezuela and Qatar – and non-OPEC state Russia met in Doha to deal with decreasing oil prices and relieving the glut on the world oil market. They agreed to freeze the oil output at the level of January 11.

Iran, which eyes regaining its pre-sanctions share in the oil market, has already announced that it will not join the oil production freeze plan. The country produced about 2.9 million barrels per day in January and the government is talking about adding a further 500,000 bpd to exports.

Iran wishes to increase the inflow of petrodollars to the state budget by returning to the world oil market.

Meanwhile, Fereydoun Barkeshli, the former general manager at National Iranian Oil Company in OPEC, announced that Iran has lost more revenues from sharp fall in crude oil prices since 2013 than the entire loss under the crude oil embargo since 2008.

Therefore, Barkeshli believes, Iran should welcome every opportunity, including an output freeze, if there are enough indications that Saudi Arabia and Russia are willing to help coordinate market balance.

“I consider the Qatar meeting of major OPEC and non-OPEC ministers a major breakthrough, very much in line with OPEC tradition and style of shaping up and engineering international oil market,” he told Trend, adding that in fact OPEC hadn’t made such a gesture for years due to the fact that market somehow automatically balanced itself and that geopolitical factors de-linked themselves from oil market fundamentals.

“In fact, I personally watch the market with some excitement since it reminds me of the 1980s and 1990s when OPEC style was very much in place,” Barkeshli stated.

However, this time the situation around the market is even more complicated due to the emergence of Russia and the shale oil, he added.

“OPEC and Russia, in fact, never looked eye to eye when it came to cutting production, though Russian delegates politely attended some OPEC conferences and gave indications of cooperation without giving up a single barrel to support market stability,” heexpalined.

Barkeshli believes that “freeze for freeze” is a good start. “It is true that neither Saudi Arabia nor Russia have much more to add to the market, but the gesture is positive and in OPEC tradition of reaching consensus one step at a time,” he noted.

He further added that Iran has been forced out of the market for some years and all other producers supplied [the crude] at full force.

“In the past when a country was deprived of its production quota it was supposed to pass its quota to another member as a quota loan. That meant that once a member was able to return to the market, it would get back its production quota.

Unfortunately, OPEC gave up its quota policy back in 2012, but no producer expects Iran to freeze its crude production at the current level,” Barkeshli said, adding that there are currently 1.23 billion barrels of idle crude oil in the market and over four millions barrels of excess daily production of crude oil is supplied to the market.
Source: AzerNews